SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
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14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss.240.14a-12
VENDINGDATA CORPORATION
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(Name of Registrant as Specified In Its Charter)
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VENDINGDATA CORPORATION
May 9, 2003
Dear Stockholder:
It is my pleasure to invite you to VendingData Corporation's 2003
Annual Meeting of Stockholders.
We will hold the meeting on Thursday, May 29, 2003, at 10:00 a.m., at
our principal offices at 6830 Spencer Street, Las Vegas, Nevada 89119. In
addition to the formal items of business, we will review the major developments
of 2002 and answer any questions you may have.
This booklet includes the Notice of Annual Meeting and the Proxy
Statement. The Proxy Statement describes the business that we will conduct at
the meeting and provides information about VendingData Corporation.
Your vote is important. Whether or not you plan to attend the meeting,
please complete, date, sign and return the enclosed proxy card promptly. If you
attend the meeting and prefer to vote in person, you may do so.
We look forward to seeing you at the meeting.
Sincerely,
Steven J. Blad
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VENDINGDATA CORPORATION
__________________
NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS
__________________
Date: Thursday, May 29, 2003
Time: 10:00 a.m.
Place: 6830 Spencer Street
Las Vegas, Nevada 89119
Dear Stockholders:
At our 2003 Annual Meeting, we will ask you to:
o Elect four directors each to serve for a term of one year;
o Approve an amendment to our Amended and Restated Articles of
Incorporation increasing the authorized number of shares of
common stock from 16,000,000 to 25,000,000;
o Approve an Amendment of our 1999 Stock Option Plan; and
o Transact any other business that may properly be presented at
the Annual Meeting.
If you were a stockholder of record at the close of business on April
30, 2003, you may vote at the Annual Meeting.
You are cordially invited to attend the meeting in person. IF YOU
DESIRE TO VOTE IN PERSON, YOU MUST REGISTER AT THE ANNUAL MEETING WITH THE
INSPECTORS OF ELECTION PRIOR TO THE BEGINNING OF THE ANNUAL MEETING. IF YOU WILL
NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON, WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE SO THAT YOUR SHARES MAY BE
REGULARLY VOTED AT THE ANNUAL MEETING. IF YOU DO ATTEND THE MEETING, YOU MAY
THEN WITHDRAW YOUR PROXY AND VOTE IN PERSON. IT IS IMPORTANT THAT ALL
STOCKHOLDERS VOTE.
By Order of the Board of Directors,
Stacie L. Brown
CORPORATE SECRETARY
Las Vegas, Nevada
Dated: May 9, 2003
VENDINGDATA CORPORATION
PROXY STATEMENT
TABLE OF CONTENTS
PAGE
----
INFORMATION ABOUT OUR STOCK OWNERSHIP.............................................................................4
INFORMATION ABOUT OUR BOARD OF DIRECTORS AND EXECUTIVE OFFICERS...................................................6
Directors................................................................................................6
Significant Employees....................................................................................7
Compensation of Non-Employee Directors...................................................................7
Board of Directors Meetings..............................................................................7
Committees of the Board of Directors.....................................................................7
Compensation of Executive Officers.......................................................................9
Employment Agreements...................................................................................10
Compliance with Section 16(a) of the Securities Exchange Act of 1934....................................11
Certain Relationships and Related Transactions..........................................................11
Limitation of Liability and Indemnification Matters.....................................................12
Transaction Review......................................................................................13
DISCUSSION OF PROPOSALS..........................................................................................14
Proposal 1: Election of Directors....................................................................14
Proposal 2: Approval of Amendment to Our Amended and Restated Articles of Incorporation..............14
Proposal 3: Approval to Amendment of Our 1999 Stock Option Plan......................................15
INFORMATION ABOUT OUR INDEPENDENT PUBLIC ACCOUNTANTS.............................................................19
INFORMATION ABOUT OUR VOTING PROCEDURES..........................................................................19
INFORMATION ABOUT OUR 2004 ANNUAL MEETING OF STOCKHOLDERS........................................................19
INFORMATION ABOUT STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING..............................................19
OTHER BUSINESS...................................................................................................20
EXHIBIT "A": CERTIFICATE OF AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION OF VENDINGDATA
CORPORATION AND SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION OF VENDINGDATA
CORPORATION.............................................................................................22
EXHIBIT "B": VENDINGDATA CORPORATION AMENDED AND RESTATED 1999 STOCK OPTION PLAN
AS APPROVED BY THE BOARD OF DIRECTORS ON APRIL 22, 2003 AND AS ORIGINALLY
APPROVED ON JANUARY 5, 1999......................................................................................28
VENDINGDATA CORPORATION
6830 Spencer Street
Las Vegas, Nevada 89119
___________________________
PROXY STATEMENT
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The accompanying proxy is solicited by our board of directors. THIS
PROXY STATEMENT AND THE ACCOMPANYING FORM OF PROXY ARE BEING MAILED TO OUR
STOCKHOLDERS ON OR ABOUT MAY 9, 2003.
WHY DID YOU SEND ME THIS PROXY STATEMENT?
We sent you this proxy statement and the enclosed proxy card because
our board of directors is soliciting your proxy to vote at the 2003 Annual
Meeting of Stockholders. This proxy statement summarizes the information you
need to know to cast an informed vote at the annual meeting. However, you do not
need to attend the annual meeting to vote your shares. Instead, you may simply
complete, sign and return the enclosed proxy card.
Along with this proxy statement, we are also sending you our amended
2002 Annual Report on Form 10-KSB/A, which includes our financial statements. In
this proxy statement, unless the context otherwise indicates, the "company,"
"we," "us," and "our" refer to VendingData Corporation.
WHO IS ENTITLED TO VOTE?
We will begin sending this proxy statement, the attached Notice of
Annual Meeting and the enclosed proxy card on or about May 9, 2003 to all
stockholders entitled to vote. Stockholders who were the record owners of our
common stock at the close of business on April 30, 2003 are entitled to vote. On
this record date, there were 7,625,826 shares of VendingData common stock
outstanding. The information with respect to our common stock as of this date
and all other information relating to our common stock described in this proxy
statement reflect the 1-for-5 reverse stock split that was effected on January
3, 2003.
WHAT CONSTITUTES A QUORUM?
A majority of the outstanding shares of our common stock entitled to
vote at the annual meeting must be present, in person or by proxy, in order to
constitute a quorum. We can only conduct the business of the annual meeting if a
quorum has been established. We will include proxies marked as abstentions and
broker non-votes in determining the number of shares present at the annual
meeting.
HOW MANY VOTES DO I HAVE?
Each share of common stock that you own entitles you to one vote.
HOW DO I VOTE BY PROXY?
Whether or not you plan to attend the annual meeting, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the annual meeting and vote.
If you properly fill in your proxy card and send it to us in time to
vote, your "proxy" (one of the individuals named on your proxy card) will vote
your shares as you have directed. If you sign the proxy card but do not make
specific choices, your proxy will vote your shares as recommended by the board
of directors as follows:
o "FOR" the election of all four nominees, Steven J. Blad, James
E. Crabbe, Ronald O. Keil, and Bob L. Smith, for director;
o "FOR" approval of the amendment to our amended and restated
articles of incorporation to increase the authorized number of
shares of common stock from 16,000,000 to 25,000,000; and
o "FOR" approval of the amendment to our 1999 Stock Option Plan.
If any other matter is presented, your proxy will vote in accordance
with the recommendation of our board of directors, or, if no recommendation is
given, in accordance with the proxies' best judgment. At the time this proxy
statement went to press, we knew of no matters which needed to be acted on at
the annual meeting, other than those discussed in this proxy statement.
MAY I CHANGE MY VOTE AFTER I RETURN MY PROXY?
Yes. If you fill out and return the enclosed proxy card, you may change
your vote at any time before the vote is conducted at the annual meeting. You
may change your vote in any one of four ways:
o By sending to our Corporate Secretary another completed proxy
card with a later date;
o By notifying our Corporate Secretary in writing before the
annual meeting that you have revoked your proxy;
o By notifying the inspectors of election in writing at the
annual meeting prior to the beginning of the annual meeting;
or
o By voting in person by ballot at the annual meeting after
notifying the inspectors of election of your intention to do
so prior to the beginning of the annual meeting.
HOW DO I VOTE IN PERSON?
If you plan to attend the annual meeting and vote in person, we will
give you a ballot form when you arrive. However, if your shares are held in the
name of your broker, bank or other nominee, you must bring a power of attorney
from your nominee in order to vote at the annual meeting.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
PROPOSAL 1:
Elect Four Directors There are four openings on our board of
directors, and we have nominated four
persons. The four nominees for director
who receive the most votes will be
elected. If you do not vote for a
particular nominee, or you indicate
"WITHHOLD" to vote for a particular
nominee on your proxy card, your vote
will not count either "for" or "against"
the nominee. Our amended and restated
articles of incorporation do not permit
cumulative voting.
-2-
PROPOSAL 2:
Approve Amendment of Articles of The affirmative vote of a majority of
Incorporation the outstanding shares is required to
approve the proposal. So, if you
"ABSTAIN" from voting, it has the effect
of a vote against this proposal.
PROPOSAL 3:
Approve Amendment of the 1999 Stock The affirmative vote of a majority of
Option Plan the outstanding shares is required to
approve the proposal. So, if you
"ABSTAIN" from voting, it has the effect
of a vote against this proposal.
None of the proposals to be voted on at the annual meeting create a
right of appraisal under Nevada law. A vote "FOR" or "AGAINST" any of the
proposals set forth in this proxy statement will only affect the outcome of the
proposal.
WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?
We will pay all the costs of soliciting these proxies. In addition to
mailing proxy soliciting material, our directors, officers, and employees also
may solicit proxies in person, by telephone or by other electronic means of
communication for which they will receive no compensation.
HOW DO I OBTAIN AN ANNUAL REPORT ON FORM 10-KSB/A?
We have enclosed a copy of our amended 2002 Annual Report on Form
10-KSB/A with this proxy statement. If you would like another copy of our
amended 2002 Annual Report on Form 10-KSB/A, we will send you one without
charge. Our amended Annual Report on Form 10-KSB/A includes a list of exhibits
filed with the Securities and Exchange Commission, or SEC, but the amended 2002
Annual Report provided to you does not include the exhibits. If you wish to
receive copies of the exhibits, we will send them to you. Expenses for copying
and mailing them to you will be your responsibility. Please write to:
VendingData Corporation
6830 Spencer Street
Las Vegas, Nevada 89119
Attention: Stacie L. Brown, Corporate Secretary
In addition, the SEC maintains an Internet site at http://www.sec.gov that
provides access to our SEC filings.
-3-
INFORMATION ABOUT OUR STOCK OWNERSHIP
The SEC has defined "beneficial ownership" to mean more than ownership
in the usual sense. For example, a person has beneficial ownership of a share
not only if he owns it in the usual sense, but also if he has the power to vote,
sell or otherwise dispose of the share. Beneficial ownership also includes the
number of shares that a person has the right to acquire within 60 days pursuant
to the exercise of options or warrants or the conversion of notes, debentures or
other indebtedness. Two or more persons might count as beneficial owners of the
same share.
HOW MUCH OF OUR COMMON STOCK IS OWNED BY DIRECTORS, EXECUTIVE OFFICERS AND
GREATER THAN 5% STOCKHOLDERS?
The following is a list of the beneficial stock ownership as of April
18, 2003, of (1) all persons who beneficially owned more than 5% of our
outstanding common stock, (2) all directors, (3) all executive officers named in
the Summary Compensation Table (see page 9) and (4) all officers and directors
as a group at the close of business on April 18, 2003, according to
record-ownership listings as of that date, and according to verifications as of
April 18, 2003, which we solicited and received from each officer and director:
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership(1),(2) Class(2)
- -------------- ---------------- --------------------------- --------
Common James E. Crabbe 5,685,579(3) 73.2%
6830 Spencer Street
Las Vegas, Nevada 89119
Common Steven J. Blad 478,264(4) 5.9%
6830 S. Spencer Street
Las Vegas, Nevada 89119
Common Yvonne Huson 986,450(5) 12.9%
6830 Spencer Street
Las Vegas, Nevada 89119
Common Bob L. Smith 375,229(6) 4.9%
6830 Spencer Street
Las Vegas, Nevada 89119
Common Ronald O. Keil 151,296(7) 1.9%
6830 Spencer Street
Las Vegas, Nevada 89119
Common Stacie L. Brown 25,600(8) .3%
6830 Spencer Street
Las Vegas, Nevada 89119
Common John R. Spina 16,000(9) .2%
6830 Spencer Street
Las Vegas, Nevada 89119
Common All executive officers and 6,723,968(10) 81.2%
directors as a group (7 persons)
- ----------------------------
-4-
* Less than one percent.
(1) Unless otherwise noted, the persons identified in this table have sole
voting and sole investment power with regard to the shares beneficially
owned by them.
(2) Includes shares issuable upon the exercise of options and warrants
exercisable within 60 days of the stated date.
(3) Includes 4,574,066 shares held directly by Mr. Crabbe, 600 shares issuable
upon the exercise of stock options, 50,000 shares issuable to the James E.
Crabbe Revocable Trust upon the exercise of warrants, 88,463 shares
issuable to the James E. Crabbe Revocable Trust upon the conversion of
debt, and 972,450 shares held by Yvonne M. Huson, or her related trusts,
for which Mr. Crabbe holds voting power.
(4) Includes 35,020 shares held directly by Mr. Blad, 244 shares held by Mr.
Blad's spouse, and 443,000 shares issuable upon the exercise of stock
options.
(5) Includes 643,958 shares held directly by Ms. Huson, 19,424 shares held by
the Richard S. Huson GST Exempt Trust U/T/A dated September 4, 1998, a
trust for which Ms. Huson is trustee, 309,068 shares held by the Richard S.
Huson Marital Trust U/T/A dated September 4, 1998, a trust for which Ms.
Huson is trustee and beneficiary, and 14,000 shares held by Tower Rock
Partners, LLC, an entity in which Ms. Huson holds an interest.
(6) Includes 164,011 shares held directly by Mr. Smith, 199,018 shares held by
VIP's Industries, Inc., 200 shares held jointly by Mr. Smith and his
daughter, and 12,000 shares issuable upon the exercise of stock options.
(7) Includes 113,558 shares held directly by Mr. Keil, 5,666 shares held by Mr.
Keil's spouse, 1,000 shares issuable upon the exercise of stock options,
2,500 shares issuable upon the exercise of warrants and 28,572 shares
issuable upon the conversion of debt.
(8) Includes 25,600 shares issuable upon the exercise of stock options.
(9) Includes 16,000 shares issuable upon the exercise of stock options.
(10) Includes 6,078,233 shares issued directly, 476,200 shares issuable upon the
exercise of stock options, 52,500 shares issuable upon the exercise of
warrants and 117,035 shares issuable upon the conversion of debt. As 11,000
options held by Mr. Blad and 11,000 options held by Mr. Smith were granted
by the Huson Trusts, the underlying shares of which are included in the
number of shared issued directly, as reflected in this footnote no. 10,
these 22,000 options are not included in the number of options reflected in
this footnote no. 10.
-5-
INFORMATION ABOUT OUR BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following information is furnished with respect to each member of
our board of directors and our executive officers who are not directors. There
are no family relationships between or among any of our directors or executive
officers.
DIRECTORS
DIRECTOR
NAME AGE SINCE POSITION
---- --- ----- --------
Steven J. Blad 51 1998 Chief Executive Officer, President, and
Director
James E. Crabbe 57 2000 Chairman of the Board
Ronald O. Keil 70 1998 Director
Bob L. Smith 64 1998 Vice-Chairman of the Board
STEVEN J. BLAD joined us in October 1996 and served as Vice President
of Sales and Marketing until April 1997, when he became our President. Mr. Blad
served in that position until May 1998, when he became our Chief Executive
Officer, President and Director. Mr. Blad received a bachelor's degree in 1973
from Carson Newman. He obtained a Masters of Education degree in 1975 from
Southern Baptist Graduate School. From 1975 to 1976, Mr. Blad pursued additional
graduate studies at the University of Alabama.
JAMES E. CRABBE became a member and Vice-Chairman of our Board in May
2000 and was elected Chairman of our Board in August 2001. Since 1980, and until
November 2000, Mr. Crabbe was President of the Crabbe Huson Group, Inc., an
investment management company in Portland, Oregon. Mr. Crabbe was granted a
Series 63 Securities Dealer License in 1989 and earned a bachelor's degree from
the University of Oregon in 1967.
RONALD O. KEIL has been a member of our Board since April 1999. Since
July 1999, Mr. Keil has owned and operated two supermarkets in San Diego,
California. Since March 1995, Mr. Keil has served as Managing Partner of RJL
Properties, Inc., which owned and operated four hotels and a mini-storage
facility. In addition, from October 1993 to January 1998, Mr. Keil owned a
142-room Holiday Inn in Idaho Falls and since 1999 has owned and operated
Keil's, Inc., a chain of supermarkets in California. Mr. Keil is a founder and
director of the Bank of Clark County, Oregon. He earned a bachelor's degree in
Business Administration from Lewis and Clark College and has completed graduate
work towards an MBA from the University of Oregon.
BOB L. SMITH joined our Board in May 1998 and served as Chairman of our
Board from April 1999 until August 2001, when he became Vice-Chairman of the
Board. Mr. Smith also serves as Chairman of the Board and Chief Executive
Officer of VIP's Industries, Inc., a company co-founded by Mr. Smith in 1968
that oversees restaurant, hotel and real estate development in five Western
states. Mr. Smith serves on the Board of Directors of Umpqua Bank (formerly
Centennial Bank) and Regency of Oregon (formerly Blue Cross and Blue Shield of
Oregon), and previously served on the Board of Directors of the Crabbe-Huson
Funds, Inc., an investment management company, and Flying J. Inc., an integrated
oil company. Mr. Smith received a bachelor's degree in Business Administration
from the University of Oregon in 1962.
-6-
SIGNIFICANT EMPLOYEES
STACIE L. BROWN joined us in July 1999, as Corporate Counsel. From 1995
to 1999, she was in private practice with Dickerson, Dickerson, Consul & Pocker
in Las Vegas, Nevada, where she assisted in the representation of the Las Vegas
Convention and Visitors Authority. Ms. Brown has been admitted to the State Bar
of Nevada and the District of Columbia Bar and is admitted to practice before
the U.S. District Court, District of Nevada, the U.S. Courts of Appeal for the
Ninth and District of Columbia Circuits and the United States Supreme Court. Ms.
Brown earned her Juris Doctor from the University of Michigan Law School in 1995
and received a Bachelor of Arts degree from Ball State University in 1992
majoring in French, Political Science and Telecommunications.
JOHN R. SPINA joined us in February 2003, as Chief Financial Officer.
From October 2002 to January 2003, Mr. Spina was the President and Chief
Operating Officer at Gamecraft, Inc. From November 1999 to July 2001, Mr. Spina
served as Vice President and General Manager of Belterra Casino in Indiana, and
from August 1998 to October 1999, Mr. Spina served in these same positions with
the Grand Victoria Casino, also in Indiana. Mr. Spina received his B.S. in
accounting and his M.B.A. with a concentration in finance from Drexel
University. Mr. Spina has more than 20 years of experience in the gaming
industry, having served in various senior positions with Harrah's, Resorts
International, Ameristar and Pinnacle Entertainment.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
We paid our directors who are not our employees $500 per
quarter/meeting for 2002. All expenses for meeting attendance or out-of-pocket
expenses connected directly with our board members' representation are
reimbursed by us. Directors who are our employees do not receive compensation
for their services as directors.
BOARD OF DIRECTORS MEETINGS
Our board of directors generally meets quarterly, and in the twelve
months ended December 31, 2002, our board of directors held four meetings. All
directors attended at least 75% of the board meetings held.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board has two standing committees, the Executive Committee, which
performs the functions of a compensation committee, and the Audit Committee.
AUDIT COMMITTEE. The Audit Committee is comprised of Messrs. Keil and
Smith. Our audit committee generally meets quarterly, and in the twelve months
ended December 31, 2002, our audit committee held one meeting. As stated in the
audit committee charter that our board of directors amended as of September 6,
2000, this committee has the responsibility of recommending the firm that will
serve as our independent public accountants, reviewing the scope and results of
the audit and services provided by the independent public accountants and
meeting with our financial staff to review accounting procedures and policies.
Each member of our audit committee has been determined to be independent
pursuant to NASD Marketplace Rule 4200(a)(14).
-7-
AUDIT COMMITTEE REPORT
THE FOLLOWING AUDIT COMMITTEE REPORT DOES NOT CONSTITUTE SOLICITING
MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY OF
OUR FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE THIS REPORT BY REFERENCE.
April 30, 2003
To the Board of Directors of VendingData Corporation:
We have reviewed with management VendingData Corporation's audited
financial statements for the fiscal year ended December 31, 2002. In conjunction
with our review, we have met with the management of VendingData Corporation to
discuss the audited financial statements. In addition, we have discussed with
VendingData Corporation's independent auditor, James E. Scheifley & Associates,
P.C. ("Scheifley & Associates"), the matters required pursuant to SAS 61,
COMMUNICATION WITH AUDIT COMMITTEES, and have received the written disclosures
and the letter for Scheifley & Associates required by Independence Standards
Board Standard No. 1. Based on our review and discussion, we recommend to the
board of directors that the audited financial statements be included in
VendingData Corporation's annual report on Form 10-KSB for the fiscal year ended
December 31, 2002 filed with the SEC on March 31, 2003.
This report has been approved by all of the members of the Audit
Committee.
/s/ Ronald O. Keil
----------------------------------
Ronald O. Keil
/s/ Bob L. Smith
----------------------------------
Bob L. Smith
MEMBERS OF THE AUDIT COMMITTEE
EXECUTIVE COMMITTEE. The Executive Committee is comprised of Messrs.
Blad, Crabbe and Smith. Our executive committee generally meets quarterly, and
in the twelve months ended December 31, 2002, our executive committee held three
meetings. This committee has the responsibility of reviewing our financial
records to determine overall compensation and benefits for executive officers
and establishing and administering the policies that govern employee salaries
and benefit plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Other than
Mr. Blad, our chief executive officer and president, none of the members of the
Executive Committee serves or has served as an officer or employee of
VendingData Corporation or its subsidiaries.
-8-
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth compensation received by Steven J. Blad,
chief executive officer, and our executive officers whose total compensation for
the year ended December 31, 2002, exceeded $100,000.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to, earned by
or paid to, our chief executive officer and our other most highly-compensated
executive officer for services rendered in all capacities during fiscal years
ended December 31, 2002, 2001, and 2000.
============================ ============================================ ==================================== =============
Annual Compensation Long Term Compensation
------------------------------------
Awards Payouts
- ---------------------------- -------------------------------------------- ------------------------- ---------- -------------
Other Securities All
Annual Restricted Under-Lying LTIP Other
Name and Principal Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Position Year ($) ($) ($) ($) SARs (#)(1) ($) ($)(2)
- ---------------------------- -------- ------------ ----------- ---------- ------------ ------------ ---------- -------------
Steven J. Blad, 2002 282,200 -0- -0- -0- 665,000 -0- -0-
Chief Executive Officer, 2001 282,200 -0- -0- -0- 1,095,000 -0- -0-
President and Director 2000 282,000 -0- -0- -0- 100,000 -0- -0-
- ---------------------------- -------- ------------ ----------- ---------- ------------ ------------ ---------- -------------
Stacie L. Brown, 2002 114,918 -0- -0- -0- 37,000 -0- -0-
Corporate Counsel and 2001 101,547 -0- -0- -0- 71,000 -0- -0-
Secretary 2000 87,615 -0- -0- -0- 5,000 -0- -0-
============================ ======== ============ =========== ========== ============ ============ ========== =============
- -----------------
(1) Shares reflected are pre-1-for-5 stock split.
(2) We provide certain perquisites and other personal benefits to some
or all of the executives. The unreimbursed incremental cost to us of providing
perquisites and other personal benefits did not exceed, as to any of the
executives for any year, the lesser of $50,000 or 10% of the total salary and
bonus paid to such executive for such year.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants of stock
options during the fiscal year ended December 31, 2002 made to the named
executive officers.
=========================== ==========================================================================================
Individual Grants
- --------------------------- ------------------------------------------------------------------------------------------
Number of Securities % of Total Options/SARs Exercise or
Underlying Options/ Granted to Employees in Base Price
Name SARs Granted(1) Fiscal Year(2) ($/Share)(1) Expiration Date
- --------------------------- ----------------------- ----------------------------- ------------- ----------------------
Steven J. Blad 665,000 52.99% $.35 11/20/07
- --------------------------- ----------------------- ----------------------------- ------------- ----------------------
Stacie L. Brown 37,000 2.94% $.35 07/20/07
=========================== ======================= ============================= ============= ======================
- ------------------------
(1) Shares and exercise prices reflected are pre-1-for-5 reverse stock
split.
(2) For the year ended December 31, 2002, we granted to employees
options to purchase an aggregate of 589,750 shares of our common stock.
-9-
EMPLOYMENT AGREEMENTS
In August 1999, we entered into a new agreement with Steven J. Blad
with an effective date of January 1, 2000 and a term of three years. Pursuant to
the employment agreement, Mr. Blad shall receive a monthly base salary of
$23,500 and 400,000 stock option rights (80,000 as a result of the 1-for-5
reverse stock split as of January 3, 2003) with an exercise price of $2.50
($12.50 as a result of the 1-for-5 reverse stock split as of January 3, 2003).
With respect to the vesting of the options, 100,000 stock options (20,000 as a
result of the 1-for-5 reverse stock split) vested as of the effective date of
the employment agreement with the balance to vest over a three-year period
thereafter as long as Mr. Blad remains employed as our President and Chief
Executive Officer and satisfies certain performance goals to be established by
our board. As with the prior employment agreement with Mr. Blad, the present
employment agreement contains provisions with respect to confidentiality and
non-competition. We recorded compensation expense related to the options granted
for the excess of the fair value of the underlying common stock at the grant
date ($2.60 per share) over the exercise price of $2.50 per share during January
2000.
In November 2001, we entered into a first amendment to employment
agreement, which extended the term of the employment agreement of Mr. Blad
through December 31, 2004. The first amendment provides that 2,000,000 options
(400,000 options as a result of the 1-for-5 reverse stock split, which are
exercisable at a price of $1.75 per share) be granted upon the effective date of
the first amendment. Of the 2,000,000 options (now 400,000), 670,000 options
(now 134,000) were vested as of the effective date of the first amendment,
665,000 (now 133,000) options will vest on the first anniversary of the first
amendment, and another 665,000 (now 133,000) options will vest on the second
anniversary of the first amendment.
In July 2001, we entered into an employment agreement with Stacie L.
Brown with an effective date of July 20, 2001 and a term of two years. Pursuant
to the employment agreement, Ms. Brown shall receive an annual base salary of
not less than $115,000 and 145,000 stock option rights (29,000 options as a
result of the 1-for-5 reverse stock split) with an exercise price of $2.60 -
$.35 per share ($13.00 - $1.75 per share, as a result of the 1-for-5 reverse
stock split). With respect to the vesting of the options, 71,000 stock options
(14,200 options as a result of the 1-for-5 reverse stock split) vested as of the
effective date of the employment agreement with the balance to vest over a
two-year period thereafter as long as Ms. Brown remains employed as our
Corporate Counsel. The employment agreement provides that if the executive's
employment is terminated for cause (as defined in the employment agreement),
death of executive, or due to termination of the business, the executive will
receive no severance of any kind. In the event that the employment agreement is
terminated for any reason other than for cause, death of executive, or
termination of the business, the executive will receive a severance payment
equal to seven month's base salary. The employment agreement also contains
provisions with respect to confidentiality and non-competition.
In February 2003, we entered into an employment agreement with John R.
Spina with an effective date of February 24, 2003 and a term of two years.
Pursuant to the employment agreement, Mr. Spina shall receive an annual base
salary of $175,000 and 50,000 stock option rights with an exercise price of
$3.00. With respect to the vesting of the options, 16,000 stock options vested
as of the effective date of the employment agreement with the balance to vest
over a two-year period thereafter as long as Mr. Spina remains employed as our
Chief Financial Officer. The employment agreement provides that if the
executive's employment is terminated for cause (as defined in the employment
agreement), death of executive, or due to termination of the business, the
executive will receive no severance of any kind. In the event that the
employment agreement is terminated for any reason other than for cause, death of
executive, or termination of the business, the executive will receive a
severance payment equal to seven month's base salary. The employment agreement
also contains provisions with respect to confidentiality and non-competition.
-10-
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires our directors, executive
officers and persons who own more than 10% of our common stock, or the Reporting
Persons, to file with the SEC initial reports of ownership and changes in
ownership of our common stock. Reporting Persons are required by SEC regulations
to furnish us with copies of all Section 16(a) reports they file.
To our knowledge, based solely on our review of the copies of such
reports received or written representations from certain Reporting Persons that
no other reports were required, we believe that during our fiscal year ended
December 31, 2002, all Reporting Persons complied with all applicable filing
requirements, with the following exceptions: Yvonne M. Huson filed a late Form 4
for the month of August, 2002; Ronald O. Keil filed a late Form 4 for the month
of September, 2002; and Bob L. Smith filed late Forms 4 for the months of
January and August, 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 21, 2002, our board authorized a private placement of
$4,999,995 of convertible notes. The convertible debentures accrue interest at
9.5% per annum, mature one year from the date of issuance (where the holder has
the discretion to extend maturity date for up to four one-year periods) and are
convertible into shares of our common stock one year after issuance at a rate of
$1.75 per share. In addition, for each convertible note of $49,999.95, we issued
a warrant to purchase 2,500 shares of our common stock with an exercise price of
$1.75. Through this private placement, we issued convertible notes in the
aggregate principal amount of $4,799,995.20 and warrants to purchase 240,000
shares of our common stock. The convertible notes are convertible into 2,742,863
shares of our common stock. We used the proceeds from this private placement for
general corporate purposes and working capital. We have discontinued this
private placement of convertible debentures as of January 14, 2003. We relied
upon the exemption from registration provided by Section 4(2) of the Securities
Act.
With the approval of the Board, certain members of the Board, or
entities controlled by these Board members, participated in the Company's
private placement of convertible notes. The following table summarizes the
purchases of convertible notes by members of the Board, or related entities.
========================== ================= =============== ===================== =======================
Name Amount Warrants Maturity Convertibility
- -------------------------- ----------------- --------------- --------------------- -----------------------
The James E. Crabbe $3,949,996.05 197,500 December 31, 2003 December 31, 2003
Revocable Trust
- -------------------------- ----------------- --------------- --------------------- -----------------------
VIP's Industries, Inc. 49,999.95 2,500 December 31, 2003 December 31, 2003
- -------------------------- ----------------- --------------- --------------------- -----------------------
I.C.D., Inc. 99,999.90 5,000 December 31, 2003 December 31, 2003
- -------------------------- ----------------- --------------- --------------------- -----------------------
Ronald O. Keil April 19, 2003 and April 19, 2003 and
99,999.90 5,000 January 13, 2004 January 13, 2004
- -------------------------- ----------------- --------------- --------------------- -----------------------
Total $ 4,199,995.80 210,000
========================== ================= =============== ===================== =======================
The $3,949,996.05 convertible note and warrants to purchase 197,500
shares of the Company's common stock purchased by the James E. Crabbe Revocable
Trust, a trust for which the Company's Chairman of the Board of Directors serves
as trustee, were in exchange for the cancellation of prior indebtedness in the
amount of $3,949,996.05.
-11-
A $49,999.95 convertible note and warrants to purchase 2,500 shares of
the Company's common stock purchased by Richard O. Keil were in exchange for the
cancellation of a prior promissory note dated November 7, 2002, in the original
principle amount of $49,999.95.
The $49,999.95 convertible note and warrant to purchase 2,500 shares of
the Company's common stock purchased by VIP's Industries, Inc., an entity
controlled by the Company's Vice-Chairman of the Board of Directors, were in
exchange for the cancellation of prior indebtedness in the amount of $49,999.95.
A portion of the $99,999.90 convertible note and warrant to purchase
5,000 shares of the Company's common stock purchased by I.C.D., Inc., an entity
controlled by the Company's Vice-Chairman of the Board of Directors, was in
exchange for the cancellation of prior indebtedness in the original principal
amount of $75,000.
STOCKHOLDER RIGHTS OFFERING. On June 14, 2001, our board of directors
declared a distribution of rights to purchase shares of common stock to
stockholders of record as of June 15, 2001, or the record date, and holders of
vested options and warrants and convertible notes that possess anti-dilution
rights as of the record date. Through this rights offering, we offered an
aggregate of 26,869,770 shares of common stock upon the exercise of these rights
by rightsholders.
On August 13, 2001, and September 24, 2001, all rights that we issued
to non-California and California residents, respectively, for the purchase of
our $.001 par value common stock through our Registration Statement on Form S-3
(File No. 333-64012), as declared effective on July 13, 2001, expired. As of
September 24, 2001, rightsholders had purchased a total of 8,566,584 shares of
common stock. Rightsholders applied a total of approximately $1,892,000 in
amounts payable under short-term notes or bridge loans toward the purchase price
of the rights shares, and we received a total of approximately $1,107,000 in
cash proceeds from the exercise of the rights.
On August 14, 2001, our standby purchaser, James E. Crabbe, a director
and our controlling stockholder, purchased 16,409,068 shares of common stock.
Mr. Crabbe applied $850,000 in short-term notes and $2,504,000 in bridge loans
toward the purchase of these shares and tendered the remaining amount of the
purchase price, approximately $2,389,000, in cash. On October 5, 2001, as
standby purchaser, Mr. Crabbe purchased 1,894,118 shares of common stock and
tendered the purchase price for these shares, approximately $663,000, in cash.
As of October 5, 2001, rights for the purchase of all 26,869,770 shares
offered in the rights offering had been purchased.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Sections 78.7502 and 78.751 of the Nevada Revised Statutes provide for
the indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities, including reimbursement for expenses incurred, arising under the
Securities Act. Our amended and restated articles of incorporation provide for
indemnification of our directors, officers, employees and other agents to the
extent and under the circumstances permitted by Sections 78.7502 and 78.751 of
the Nevada Revised Statutes.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the provisions contained in our amended and restated articles of
incorporation, bylaws, Nevada law or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. If a claim for
indemnification against such liabilities, other than the payment by us of
expenses incurred or paid by one of our directors, officers or controlling
persons in the successful defense of any action, suit, or proceeding, is
asserted by such director, officer or controlling person, we will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of this issue.
-12-
In the past, we have maintained directors and officers liability
insurance of approximately $3,000,000 on behalf of our officers and directors
insuring them against liability that may occur in such capacities or arising out
of such status, and we may do so in the future.
TRANSACTION REVIEW
We have adopted a policy that any transactions with directors, officers
or entities of which they are also officers or directors or in which they have a
financial interest, will only be on terms consistent with industry standards and
approved by a majority of the disinterested directors of our board. Our bylaws
provide that no such transactions by us shall be either void or voidable solely
because of such relationship or interest of directors or officers or solely
because such directors are present at the meeting of our board or a committee
thereof which approves such transactions, or solely because their votes are
counted for such purpose if:
o the fact of such common directorship or financial interest is
disclosed or known by our board or committee and noted in the
minutes, and our board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote
for that purpose without counting the vote or votes of such
interested directors; or
o the fact of such common directorship or financial interest is
disclosed to or known by the stockholders entitled to vote,
and they approve or ratify the contract or transaction in good
faith by a majority vote or written consent of stockholders
holding a majority of the shares of common stock entitled to
vote (the votes of the common or interested directors or
officers shall be counted in any such vote of stockholders);
or
o the contract or transaction is fair and reasonable to us at
the time it is authorized or approved.
In addition, interested directors may be counted in determining the presence of
a quorum at a meeting of our board or a committee thereof that approves such
transactions. If there are no disinterested directors, we shall obtain a
majority vote of the stockholders approving the transaction.
-13-
DISCUSSION OF PROPOSALS
PROPOSAL 1: ELECTION OF DIRECTORS
Our board of directors consists of four persons. Our bylaws of provide
for a board of directors consisting of one to ten persons who are elected
generally for a term of one year. Directors are to serve until their successors
are elected and have qualified.
If the enclosed proxy is duly executed and received in time for the
annual meeting and if no contrary specification is made as provided in the
proxy, the proxy will be voted in favor of electing the nominees Steven J. Blad,
James E. Crabbe, Ronald O. Keil, and Bob L. Smith for terms of office expiring
in 2004. If any nominee shall decline or be unable to serve, the proxy will be
voted for the person as designated by our board of directors to replace any such
nominee. Our board of directors presently has no knowledge or reason to believe
that any of the nominees will refuse or be unable to serve. Any vacancies on our
board of directors that occur during the year will be filled, if at all, by our
board of directors through an appointment of an individual to serve only until
the next annual meeting.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE IN FAVOR OF ELECTING MESSRS. BLAD, CRABBE,
KEIL AND SMITH TO OUR BOARD OF DIRECTORS.
PROPOSAL 2: APPROVAL OF AMENDMENT TO OUR AMENDED AND RESTATED ARTICLES OF
INCORPORATION
On December 23, 2002, we filed a Certificate of Change in Number of
Authorized Shares of VendingData Corporation with the Nevada Secretary of State
in which we consummated a reverse stock split of common stock. The Certificate
of Change in Number of Authorized Shares provided for an effective date of
January 3, 2003, for the reverse stock split. The 1-for-5 reverse stock split
affected the outstanding and authorized shares of our common stock. As a result
of the reverse stock split, our authorized capital stock was decreased from
80,000,000 shares of common stock, $.001 par value, and 10,000,000 shares of
blank check-preferred stock, par value $.001, to 16,000,000 shares of common
stock, $.001 par value, and 10,000,000 shares of blank-check preferred stock,
$.001 par value, respectively.
As of April 21, 2003, a total of 7,625,826 shares of common stock have
been issued or reserved for issuance, leaving only 8,374,174 authorized shares
of common stock for future issuance. On April 22, 2003, our board of directors
unanimously approved an amendment to our amended and restated articles of
incorporation to increase the number of authorized shares of common stock by
9,000,000 from 16,000,000 to 25,000,000.
Article IV, Section 4.1 of our amended and restated articles of
incorporation currently provides as follows:
THE CORPORATION IS AUTHORIZED TO ISSUE EIGHTY MILLION
(80,000,000) SHARES OF COMMON STOCK, $.001 PAR VALUE ("COMMON STOCK"),
AND TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK, $.001 PAR VALUE
("PREFERRED STOCK").
As explained above, as a result of the 1-for-5 reverse stock split effective as
of January 3, 2003, the authorized number of shares of our common stock is
actually 16,000,000.
-14-
Article IV, Section 4.1 of our second amended and restated articles of
incorporation as proposed to be amended provides as follows:
THE CORPORATION IS AUTHORIZED TO ISSUE TWENTY-FIVE MILLION
(25,000,000) SHARES OF COMMON STOCK, $.001 PAR VALUE ("COMMON STOCK"),
AND TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK, $.001 PAR VALUE
("PREFERRED STOCK").
Except for evaluation of a potential underwritten public offering of
common stock of approximately 4,000,000 shares, we do not have any present
plans, agreements or understandings regarding the issuance of the proposed
additional authorized shares of common stock. Our board of directors recommends
the adoption of this amendment because we will have greater flexibility in
connection with possible future financing transactions, acquisitions of other
companies and other proper corporate purposes. Moreover, having such additional
authorized shares available will give us the ability to issue shares without the
expense and delay of a special stockholders' meeting. A delay might deprive us
of flexibility that our board of directors views as important in facilitating
the effective use of shares of common stock. Except as required by applicable
law, the authorized but unissued shares of common stock may be issued at such
times, for such purposes and for such consideration as the board of directors
may determine to be appropriate without further authorization by the
stockholders.
A copy of the Certificate of Amendment and Restatement of Articles of
Incorporation of VendingData Corporation and Second Amended and Restated
Articles of Incorporation of VendingData Corporation are attached as Exhibit A
to this proxy statement. If approved by the stockholders, the amendment to our
amended and restated articles of incorporation will become effective upon the
filing of the Certificate of Amendment and Restatement of Articles of
Incorporation of VendingData Corporation and Second Amended and Restated
Articles of Incorporation of VendingData Corporation with the Nevada Secretary
of State.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THIS AMENDMENT TO OUR AMENDED
AND RESTATED ARTICLES OF INCORPORATION.
PROPOSAL 3: APPROVAL OF AMENDMENT TO OUR 1999 STOCK OPTION PLAN
Our 1999 Stock Option Plan was originally adopted by our stockholders
on March 29, 1999. The stock option plan initially authorized 500,000 shares of
common stock for issuance, which number of shares was subsequently decreased to
100,000 shares as a result of the 1-for-5 reverse stock split that was effected
on January 3, 2003. At April 21, 2003, there were 7,150 shares of common stock
available for issuance under the stock option plan.
INCREASE IN AUTHORIZED SHARES
The board of directors has reviewed the stock option plan and the lack
of available shares thereunder and determined that the stock option plan
requires additional shares to provide the flexibility with respect to
stock-based compensation that the board of directors believes is necessary to
establish appropriate long-term incentives to achieve our objectives. The board
of directors believes that it is advisable to increase the 100,000 share limit
to 2,000,000 shares in order to provide greater flexibility to compensate senior
executive officers with equity compensation at levels designed to align the
interests of the senior executives with those of our stockholders.
-15-
The stock option plan amendment increases the number of shares of
common stock that may be issued upon the exercise of options by 1,900,000
shares, or 24.9% of the 7,625,826 shares of common stock outstanding on April
21, 2003. As amended, the stock option plan will continue to provide for
appropriate adjustments in the number of shares in the event of a stock
dividend, recapitalization, merger or similar transaction.
A copy of the stock option plan amendment is attached as Exhibit B to
this proxy statement. If approved by the stockholders, this amendment will
become effective on May 29, 2003.
SUMMARY OF MATERIAL PROVISIONS OF OUR 1999 STOCK OPTION PLAN
The following is a summary of the material provisions of our 1999 stock
option plan, as proposed to be amended.
SHARES. Our stock option plan will be amended to authorize an
additional 1,900,000 shares of common stock, approximately 24.9% of the common
stock outstanding as of April 21, 2003. These shares, in addition to the 100,000
shares currently authorized for issuance under the stock option plan provide an
aggregate of 2,000,000 shares or 26.2% of the common stock outstanding on April
21, 2003. Shares awarded under the stock option plan may consist, in whole or in
part, of authorized and unissued shares. If shares subject to an option under
the stock option plan cease to be subject to such option, or if shares awarded
under the stock option plan are forfeited, or otherwise terminate without
payment being made to the participant in the form of common stock and without
the payment of any dividends thereon, such shares will again be available for
future distribution under the stock option plan.
PARTICIPATION. Awards under the stock option plan may be made to our
officers, directors employees, consultants, advisers, independent contractors
and agents who are responsible for or contribute to the management, growth
and/or profitability of our business. While any employee may be eligible for
awards under the stock option plan, the approximate number of officers,
directors and key employees eligible for awards under the stock option plan is
12.
ADMINISTRATION. A committee of our board of directors, or the
Committee, shall officially administer the stock option plan, subject to final
approval of awards by our board of directors. The Committee must consist of at
least two directors that are both "Non-Employee Directors" as defined pursuant
to the rules adopted by the SEC under Section 16 of the Securities Exchange Act
of 1934, as amended, and "Outside Directors" as defined by the regulations
promulgated under Section 162(m) of the Internal Revenue Code. In the event our
board fails to designate a Committee to administer the stock option plan, the
plan shall be administered by our board. The members of the Committee serve at
the discretion of the Board of Directors, which may remove these members at any
time. Our board of directors fills vacancies on the Committee as well.
-16-
TYPES OF AWARDS AND TERMS. The only awards that may be granted under
the stock option plan are stock options. The Committee, subject to ratification
by our board of directors, is authorized to grant stock options, including both
incentive stock options, which can result in potentially favorable tax treatment
to the participant, and non-qualified stock options. The Committee may specify
the terms of such grants subject to the terms of the stock option plan. The
exercise price per share subject to an option is determined by the Committee or
our board of directors, but may not be less than the fair market value of a
share of our common stock on the date of the grant in the case of incentive
stock options. The maximum term of each option, the times at which each option
will be exercisable, and the provisions requiring forfeiture of unexercised
options at or following termination of employment generally are fixed by the
Committee, except that no option may have a term exceeding ten years. Incentive
stock options that are granted to holders of more than ten percent of our voting
securities are subject to certain additional restrictions, including a five-year
maximum term and a minimum exercise price of 110% of fair market value.
EXERCISE. Stock options may be exercised in whole or in part at any
time during the option period by giving written notice to us specifying the
number of shares to be purchased. Such notice shall be accompanied by payment in
full of the exercise price, either by cash or by certified or cashier's check,
or such other instrument as the Committee may accept and by payment of all
amounts that we are required to withhold by law for tax obligations.
EFFECT OF TERMINATION OF EMPLOYMENT ON OPTIONS. Upon termination of an
optionee's employment for cause, such employee's stock options will terminate.
Upon termination of an option holder's employment for any reason other than
death or permanent disability, such employee's stock options will terminate 90
days from the date on which such relationship terminates. Except as the
Committee may expressly determine otherwise at any time with respect to any
particular non-qualified option granted, if an optionee shall die or cease to
have a relationship by reason of permanent disability, any option granted to him
shall terminate one year after the date of his death or termination of
relationship due to permanent disability unless by its terms it shall expire
before such date, and shall only be exercisable to the extent that it would have
been exercisable on the date of his death or his termination of relationship due
to permanent disability. In the case of death, the option may be exercised by
the person or persons to whom the optionee's rights under the option shall pass
by will or by the laws of descent and distribution.
CHANGE OF CONTROL. In the event of a Change of Control (as defined in
the Stock Option Plan), all outstanding options not then exercisable and vested
shall become fully vested and exercisable as of the change-of-control date.
AMENDMENT. Our board of directors may at any time suspend, amend,
revise or terminate our stock option plan, except that stockholder approval is
required by a majority of the shares present and voting at either an annual or
special meeting called for such purpose to:
o materially increase the benefits accruing to participants
under our stock option plan;
o increase the number of shares of common stock that may be
issued under our plan; or
o materially modify the requirements as to eligibility for
participation in our plan.
The Committee, subject to board ratification, may amend the terms of any stock
option that has already been granted, but no such amendment shall impair the
rights of a holder without that holder's consent.
-17-
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief
description of the current federal income tax consequences generally arising
with respect to options granted under our stock option plan.
Tax consequences to us and to participants receiving awards will vary
with the type of award. Generally, a participant will not recognize income, and
we are not entitled to take a deduction, upon the grant of an incentive stock
option or a non-qualified stock option. Generally, a participant will not have
taxable income upon exercising an incentive stock option (except that the
alternative minimum tax may apply). Upon exercising an option other than an
incentive stock option, the participant must generally recognize ordinary income
equal to the difference between the exercise price and fair market value of the
freely transferable and non-forfeitable shares of common stock acquired on the
date of exercise.
If a participant sells shares of common stock acquired upon exercise of
an incentive stock option before the end of two years from the date of grant and
one year from the date of exercise, the participant must generally recognize
ordinary income equal to the difference between (i) the fair market value of the
shares of common stock at the date of exercise of the incentive stock option
(or, if less, the amount realized upon the disposition of the shares of common
stock acquired upon the exercise of the incentive stock option), and (ii) the
exercise price. Otherwise, a participant's disposition of shares of common stock
acquired upon the exercise of an option (including an incentive stock option for
which the incentive stock option holding period is met) generally will result in
short-term or long-term capital gain or loss measured by the difference between
the sale price and the participant's tax basis in such shares of common stock
(the tax basis generally being the exercise price plus any amount previously
recognized as ordinary income in connection with the exercise of the option).
We generally will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the participant in connection with an option.
We generally are not entitled to a tax deduction relating to amounts that
represent a capital gain to a participant. Accordingly, we will not be entitled
to any tax deduction with respect to an incentive stock option if the
participant holds the shares of common stock for the incentive stock option
holding periods prior to disposition of the shares.
The foregoing discussion is general in nature and is not intended to be a
complete description of the federal income tax consequences of our stock option
plan. This discussion does not address the effects of other federal taxes or
taxes imposed under state, local or foreign tax laws. Participants in our stock
option plan are urged to consult a tax advisor as to the tax consequences of
participation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THIS AMENDMENT TO OUR
1999 STOCK OPTION PLAN.
-18-
INFORMATION ABOUT OUR INDEPENDENT PUBLIC ACCOUNTANTS
Our independent accountants are James E. Scheifley & Associates, P.C.
James E. Scheifley & Associates, P.C. has audited our financial statements since
our inception. We do not presently expect a representative of the independent
auditors to be present at the meeting of stockholders. The Company's Audit
Committee has selected the firm of Piercy, Bowler, Taylor & Kern as its
independent accountants for the year ending December 31, 2003.
AUDIT FEES. The aggregate fees billed for professional services
rendered for the audit of our financial statements for the year ended December
31, 2002, and the reviews of the financial statements included in our Forms
10-QSB for fiscal year 2002 was $14,570.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. No
financial information systems design and implementation fees were paid.
ALL OTHER FEES. No other fees were paid.
Our audit committee has considered the issue that our independent
accountants provide the services set forth in FINANCIAL INFORMATION SYSTEMS
DESIGN AND IMPLEMENTATION FEES and ALL OTHER FEES and has determined that having
our independent accountants provide such services is compatible with maintaining
the principal accountant's independence.
INFORMATION ABOUT OUR VOTING PROCEDURES
We will appoint three inspectors of election to: (i) determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity, and effect of a proxy; (ii) receive votes, ballots, or consents; (iii)
hear and determine all challenges and questions in any way arising in connection
with the right to vote; (iv) count and tabulate all votes or consents; (v)
determine when the polls shall close; (vi) determine the results; and (vii)
perform any other act that may be proper to conduct the election or vote with
fairness to all stockholders.
INFORMATION ABOUT OUR 2004 ANNUAL MEETING OF STOCKHOLDERS
The next annual meeting of stockholders will be held in or about May
2004.
INFORMATION ABOUT STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
Under certain circumstances, stockholders are entitled to present
proposals at stockholder meetings. If you wish to submit a proposal to be
included in our 2004 proxy statement, we must receive it, in a form that
complies with the applicable securities laws, on or before January 1, 2004.
Please address your proposals to VendingData Corporation, 6830 Spencer Street,
Las Vegas, NV 89119, Attention: Corporate Secretary.
In addition, in the event a stockholder proposal is not submitted to us
prior to March 1, 2004, the proxy to be solicited by the board of directors for
the 2004 Annual Meeting of Stockholders will confer authority on the holders of
the proxy to vote the shares in accordance with their best judgment and
discretion if the proposal is presented at the 2004 Annual Meeting of
Stockholders without any discussion of the proposal in the proxy statement for
such meeting.
-19-
OTHER BUSINESS
Our board of directors does not know of any other business that will be
presented for action by the stockholders at this annual meeting. However, if any
business other than that set forth in the Notice of Annual Meeting of
Stockholders should be presented at the annual meeting, the members of the proxy
committee named in the enclosed proxy intend to take such action as will be in
harmony with the policies of our board of directors, and in that connection will
use their discretion and vote all proxies in accordance with their judgment.
Our 2002 Amended Annual Report to Stockholders, including financial
statements at and for the periods ended December 31, 2002, accompanies these
proxy materials, which are being mailed to all of our stockholders as of April
30, 2003.
By order of the Board of Directors,
Stacie L. Brown
Corporate Secretary
Dated: May 9, 2003
OUR ANNUAL REPORT ON SEC FORM 10-KSB/A, INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO, FOR THE 12 MONTHS ENDED DECEMBER 31, 2002, WILL BE
FURNISHED WITHOUT CHARGE TO ANY BENEFICIAL OWNER OF SECURITIES ENTITLED TO VOTE
AT THIS ANNUAL MEETING. TO OBTAIN A COPY OF THE FORM 10-KSB/A, WRITTEN REQUEST
MUST BE MADE TO US, AND THE REQUESTING PERSON MUST REPRESENT IN WRITING THAT
SUCH PERSON WAS A BENEFICIAL OWNER OF OUR SECURITIES AS OF APRIL 30, 2003.
REQUESTS SHOULD BE ADDRESSED TO:
VendingData Corporation
Attention: Stacie L. Brown, Corporate Secretary
6830 Spencer Street
Las Vegas, Nevada 89119
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VENDINGDATA CORPORATION
THIS PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING ON MAY 29, 2003.
The undersigned stockholder of VendingData Corporation hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders, Proxy
Statement, and Informational Statement to Stockholders in connection with the
Annual Meeting of Stockholders to be held at the principal offices of
VendingData Corporation, 6830 Spencer Street, Las Vegas, Nevada 89119, on
Wednesday, May 29, 2003, at 10:00 o'clock in the morning, local time, and hereby
appoints Steven J. Blad, James E. Crabbe, John R. Spina and Stacie L. Brown and
each or any of them, proxies, with power of substitution, to attend and to vote
all shares the undersigned would be entitled to vote if personally present at
said Annual Meeting and at any adjournment thereof. The proxies are instructed
to vote as follows:
(1) Election of Directors: FOR WITHHELD
STEVEN J. BLAD [ ] [ ]
JAMES E. CRABBE [ ] [ ]
RONALD O. KEIL [ ] [ ]
BOB L. SMITH [ ] [ ]
- OR -
[ ] VOTE FOR ALL NOMINEES [ ] VOTE WITHHELD FROM ALL NOMINEES
(2) Amend our Amended and Restated Articles of Incorporation to Increase the
Authorized Number of Shares of Common Stock from 16,000,000 to 25,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Amend our 1999 Stock Option Plan to Increase the Authorized Number of
Shares of Common Stock for Issuance from 100,000 to 2,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, upon such other matters as may properly come before
the Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
FAVOR OF ALL NOMINEES LISTED, AND, IN THE DISCRETION OF THE PROXIES, ON OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
Date: ___________________________, 2003
Signature(s)
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NOTE: PLEASE SIGN PROXY EXACTLY AS YOUR NAME APPEARS.
Date the Proxy in the space provided. If shares are held in the name of two or
more persons, all must sign. When signing as attorney, executor, administrator,
trustee, or guardian, give full title as such. If signer is a corporation, sign
full corporate name by duly authorized officer.
EXHIBIT A
CERTIFICATE OF AMENDMENT AND RESTATEMENT
OF
ARTICLES OF INCORPORATION
OF
VENDINGDATA CORPORATION,
A NEVADA CORPORATION
THE UNDERSIGNED hereby certifies as follows:
1. He is the duly elected and acting President of VendingData
Corporation, a Nevada corporation (the "Corporation").
2. On December 23, 2002, the Corporation filed a Certificate of Change
in Number of Authorized Shares with the Nevada Secretary of State through which
the Corporation effected a 1-for-5 reverse stock split of its authorized and
outstanding shares of common stock, $.001 par value ("Common Stock"), as of
January 3, 2003.
3. On April 22, 2003, the Board of Directors of the Corporation
unanimously approved the second amendment and restatement of the Corporation's
articles of incorporation (the "Articles"), pursuant to Nevada Revised Statutes
78.385.
4. On May ___, 2003, upon the recommendation of the Board of Directors
of the Corporation, the proposed second amendment to the Articles was submitted
to the stockholders of the Corporation. The stockholders holding _________
shares of the Company's Common Stock were entitled to vote on the amendment,
with amendment to the Articles requiring the affirmative vote of a majority of
the outstanding shares of Common Stock. The holders of ________ shares of Common
Stock, constituting ____% of those votes entitled to be cast, voted in favor of
the amendment to Article IV increasing the authorized Common Stock from
16,000,000 to 25,000,000 shares. The Company having received the approval
required for the amendment to Article IV, the amendment as set forth below is
incorporated in the Second Amended and Restated Articles of Incorporation
attached hereto.
5. Article IV, Shares of Stock, is hereby deleted and replaced in its
entirety with a new Article IV to read in full as follows:
ARTICLE IV
SHARES OF STOCK
SECTION 4.1. CAPITAL STOCK
The Corporation is authorized to issue twenty-five million
(25,000,000) shares of common stock, $.001 par value ("Common Stock"),
and ten million (10,000,000) shares of preferred stock, $.001 par value
("Preferred Stock"). Common Stock and Preferred Stock may be issued
from time to time without action by the stockholders. Common Stock and
Preferred Stock may be issued for such consideration as may be fixed
from time to time by the Board of Directors.
SECTION 4.2. COMMON STOCK
The shares of authorized Common Stock of the Corporation shall
be identical in all respects and shall have equal rights and
privileges.
SECTION 4.3. PREFERRED STOCK
The Board of Directors shall have authority to issue the
shares of Preferred Stock from time to time on such terms as it may
determine, and to divide the Preferred Stock into one or more series
and in connection with the creation of any such series to fix by the
resolution or resolutions providing for the issue of shares thereof the
voting powers, full or limited, or no voting powers, the designations,
powers and relative, participating, optional, or other special rights
of such series, and qualifications, limitations, or restrictions
thereof, to the full extent now or hereafter permitted by law.
SECTION 4.4. VOTING POWER FOR HOLDERS OF COMMON STOCK AND PREFERRED
STOCK
Except as otherwise provided in these Articles of
Incorporation, each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held by him or her on all matters
submitted to stockholders for a vote and each holder of any series of
Preferred Stock shall have no voting rights, either general or
specific, of any kind whatsoever except to the extent expressly so
provided by the Board of Directors pursuant to Section 4.3 hereof.
6. The text of the Second Amended and Restated Articles of
Incorporation is hereby amended by this Certificate to read in full as follows:
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SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
VENDINGDATA CORPORATION
A NEVADA CORPORATION
ARTICLE I
NAME
The name of the corporation is VendingData Corporation (the
"Corporation").
ARTICLE II
RESIDENT AGENT AND REGISTERED OFFICE
The name and address of the Corporation's resident agent for service of
process is Stacie L. Brown, 6830 Spencer Street, Las Vegas, Nevada 89119.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the NRS.
ARTICLE IV
SHARES OF STOCK
SECTION 4.1. CAPITAL STOCK
The Corporation is authorized to issue twenty-five million (25,000,000)
shares of common stock, $.001 par value ("Common Stock"), and ten million
(10,000,000) shares of preferred stock, $.001 par value ("Preferred Stock").
Common Stock and Preferred Stock may be issued from time to time without action
by the stockholders. Common Stock and Preferred Stock may be issued for such
consideration as may be fixed from time to time by the Board of Directors.
SECTION 4.2. COMMON STOCK
The shares of authorized Common Stock of the Corporation shall be
identical in all respects and shall have equal rights and privileges.
SECTION 4.3. PREFERRED STOCK
The Board of Directors shall have authority to issue the shares of
Preferred Stock from time to time on such terms as it may determine, and to
divide the Preferred Stock into one or more series and in connection with the
creation of any such series to fix by the resolution or resolutions providing
for the issue of shares thereof the voting powers, full or limited, or no voting
powers, the designations, powers and relative, participating, optional, or other
special rights of such series, and qualifications, limitations, or restrictions
thereof, to the full extent now or hereafter permitted by law.
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SECTION 4.4. VOTING POWER FOR HOLDERS OF COMMON STOCK AND PREFERRED STOCK
Except as otherwise provided in these Articles of Incorporation, each
holder of Common Stock shall be entitled to one vote for each share of Common
Stock held by him or her on all matters submitted to stockholders for a vote and
each holder of any series of Preferred Stock shall have no voting rights, either
general or specific, of any kind whatsoever except to the extent expressly so
provided by the Board of Directors pursuant to Section 4.3 hereof.
ARTICLE V
DIRECTORS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which consist of not less than
one (1) and no more than ten (10) directors. Provided that the Corporation has
at least one director, the number of directors may at any time or times be
increased or decreased as provided in the Bylaws.
ARTICLE VI
BYLAWS
The Board of Directors shall have power to make, alter, amend and
repeal the Bylaws of the Corporation. Any Bylaws made by the Board of Directors
under the powers conferred hereby may be altered, amended or repealed by a
majority vote of the entire Board of Directors or by a two-thirds vote of all of
the stock issued and outstanding at any annual or special meeting of
stockholders, provided that notice of intention to amend shall have been
contained in the notice for such meeting.
ARTICLE VII
DIRECTORS' AND OFFICERS' LIABILITY
A director or officer of the Corporation shall not be personally liable
to this Corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, but this Article shall not eliminate or limit the
liability of a director or officer for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or (ii) the unlawful
payment of distributions. Any repeal or modification of this Article by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such repeal or
modification.
ARTICLE VIII
INDEMNITY
Every person who was or is a party to, or is threatened to be made a
party to, or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he, or a
person of whom he is the legal representative, is or was a director or officer
of the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture trust or other enterprise, shall be indemnified and
held harmless to the fullest extent legally permissible under the laws of the
State of Nevada from time to time against all expenses, liability and loss
(including attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by him in connection therewith. Such
right of indemnification shall be a contract right, which may be enforced in any
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manner desired by such person. The expenses of directors and officers incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
Corporation as they are incurred and in advance of the final disposition of the
action suit or proceeding, upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
Corporation. Such right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire, and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any bylaw,
agreement, vote of stockholders, provision of law, or otherwise, as well as
their rights under this Article.
Without limiting the application of the foregoing, the Board of
Directors may adopt Bylaws from time to time with respect to indemnification, to
provide at all times the fullest indemnification permitted under the laws of the
State of Nevada, and may cause the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the Corporation would have the power to indemnify
such person. The indemnification provided in this Article shall continue as to a
person who has ceased to be a director, officer, employee, agent, and shall
inure to the benefit of the heirs, executors and administrators of such person.
ARTICLE IX
GAMING REGULATORY MATTERS
If the Nevada Gaming Commission or the governing gaming regulatory
agency of a jurisdiction in which the Corporation holds a privileged license
(collectively "Gaming Regulatory Authorities") at any time determines that a
holder of stock or other security of this Corporation is unsuitable to hold such
stock or other security, then, until such stock or security is no longer owned
by such person, (a) the Corporation shall not be required or permitted to pay
any dividend or interest with respect to the stock or security, (b) the holder
of such stock or security shall not be entitled to vote on any matter as the
holder of such stock or security, and such stock or security shall not, for any
purpose whatsoever, be included in the stock or security of the Corporation
entitled to vote, and (c) the Corporation shall not pay any remuneration in any
form to the holder of such stock or security.
If the Gaming Regulatory Authorities determine that a holder of stock
or other security of this Corporation is unsuitable, such holder shall, upon
written demand of the Corporation, relinquish ownership of such stock or
security and, if the Corporation determines it to be necessary, the Corporation
may purchase such stock or security for cash at fair market value to be
determined at the sole discretion of the Corporation.
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IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
_________, 2003, hereby declaring and certifying that the facts stated
hereinabove are true.
---------------------------------------
Steven J. Blad
President
EXHIBIT B
VENDINGDATA CORPORATION
AMENDED AND RESTATED 1999 STOCK OPTION PLAN AS
APPROVED BY THE BOARD OF DIRECTORS ON APRIL 22, 2003
AND AS ORIGINALLY APPROVED ON JANUARY 5, 1999
1. PURPOSE
The purpose of the VendingData Corporation 1999 Stock Option Plan is to
further the interests of VendingData Corporation, a Nevada corporation (the
"Company"), by encouraging and enabling selected officers, directors, employees,
consultants, advisers, independent contractors and agents, upon whose judgment,
initiative and effort the Company is largely dependent for the successful
conduct of its business, to acquire and retain a proprietary interest in the
Company by ownership of its stock through the exercise of stock options to be
granted hereunder. Options granted hereunder are either options intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or non-qualified stock options.
2. DEFINITIONS
Whenever used herein the following terms shall have the following
meanings, respectively:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Stock Option or Compensation Committee
appointed by the Board, or if no committee has been appointed, a reference to
"Committee" shall be deemed to refer to the Board.
(d) "Common Stock" shall mean the Company's Common Stock, $.001 par
value.
(e) "Company" shall mean VendingData Corporation, a Nevada corporation.
(f) "Employee" shall mean, in connection with Incentive Options, only
employees of the Company.
(g) "Fair Market Value Per Share" of the Common Stock on any date shall
mean, if the Common Stock is publicly traded, the mean between the highest and
lowest quoted selling prices of the Common Stock on such date or, if not
available, the mean between the bona fide bid and asked prices of the Common
Stock on such date. In any situation not covered above or if there were no sales
on the date in question, the Fair Market Value Per Share shall be determined by
the Committee in accordance with Section 20.2031-2 of the Federal Estate Tax
Regulations.
(h) "Incentive Option" shall mean an Option granted under the Plan,
which is designated as and qualified as an incentive stock option within the
meaning of Section 422 of the Code.
(i) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended, or any successor rule.
(j) "Non-Qualified Option" shall mean an Option granted under the Plan
which is designated as a non-qualified stock option and which does not qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(k) "Option" shall mean an Incentive Option or a Non-Qualified Option.
(l) "Optionee" shall mean any person who has been granted an Option
under the Plan.
(m) "Outside Director" shall have the meaning set forth in Section
162(m) of the Code.
(n) "Permanent Disability" shall mean termination of a Relationship
with the Company with the consent of the Company by reason of permanent and
total disability within the meaning of Section 22(e)(3) of the Code.
(o) "Plan" shall mean the VendingData Corporation 1999 Stock Option
Plan, as amended.
(p) "Relationship" shall mean that the Optionee is or has agreed to
become an officer, director, employee, consultant, adviser, independent
contractor or agent of the Company or any subsidiary of the Company.
(q) "Termination for Cause" means the termination of any employee's
employment with the Company, whether voluntary or involuntary, that is
determined by the Committee to have resulted from the discovery by the Company
of the employee's dishonesty, commission of a felony (regardless of whether or
not prosecuted) or fraud.
3. ADMINISTRATION
(a) The Plan shall be administered by a Committee of at least two
directors of the Company appointed by the Board, all members of which are both
Non-Employee Directors and Outside Directors. The Board may from time to time
appoint members of the Committee in substitution for or in addition to members
previously appointed and may fill vacancies. In the event the Board fails to
designate a Committee to administer the Plan, the Plan shall be administered by
the Board. To the extent not inconsistent with applicable law, the Board or
Committee may from time to time delegate to one or more officers of the Company
any or all of its authorities granted hereunder except with respect to awards to
persons subject to Section 16 of the Securities Exchange Act of 1934, as
amended.
(b) Any action of the Committee with respect to the administration of
the Plan shall be taken by majority vote or by written consent of a majority of
its members, and all actions of the Committee are subject to approval by the
Board.
(c) Subject to the provisions of the Plan, the Committee shall have the
authority to construe and interpret the Plan, to define the terms used therein,
to determine the time or times an Option may be exercised and the number of
shares which may be exercised at any one time, to prescribe, amend and rescind
rules and regulations relating to the Plan, to approve and determine the
duration of leaves of absence which may be granted to participants without
constituting a termination of their employment for purposes of the Plan, and to
make all other determinations necessary or advisable for the administration of
the Plan.
(d) The Company shall indemnify and hold harmless the members of the
Board and the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as
may result from the negligence, bad faith, willful misconduct or criminal acts
of such persons.
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(e) The Company will provide financial information to the Optionees on
the same basis as the Company provides such information to its stockholders.
(f) The Committee's interpretation and construction of any provisions
of this Plan or any Option granted under this Plan shall be final, conclusive
and binding upon all Optionees, their guardians, legal representatives and
beneficiaries, the Company and all other interested parties.
4. NUMBER OF SHARES SUBJECT TO PLAN
The aggregate number of shares of Common Stock subject to Options,
which may be granted under the Plan, shall not exceed 2,000,000 shares. The
shares of Common Stock to be issued upon the exercise of Options may be
authorized but unissued shares, shares issued and reacquired by the Company or
shares purchased by the Company on the open market. If any Option granted
hereunder shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for the
purposes of the Plan.
5. ELIGIBILITY AND PARTICIPATION
(a) Non-Qualified Options may be granted to any person who has a
Relationship with the Company or any of its subsidiaries. Incentive Options may
be granted to any Employee. The Committee shall determine the persons to whom
Options shall be granted, the time or times at which such Options shall be
granted and the number of shares to be subject to each Option. An Optionee may,
if he is otherwise eligible, be granted an additional Option or Options if the
Committee shall so determine. An Employee may be granted Incentive Options or
Non-Qualified Options or both under the Plan; provided, however, that the grant
of Incentive Options and Non-Qualified Options to an Employee shall be the grant
of separate Options, and each Incentive Option and each Non-Qualified Option
shall be specifically designated as such.
(b) In no event shall the aggregate fair market value (determined as of
the time the Option is granted) of the shares with respect to which Incentive
Options (granted under the Plan or any other plans of the Company or any
subsidiary or parent corporation of the Company) are exercisable for the first
time by an Optionee in any calendar year exceed $100,000.
(c) In no event shall the aggregate number of shares of Common Stock
with respect to which Options may be granted to a single Optionee during the
term of the Plan exceed 20 percent of the aggregate number of shares of Common
Stock subject to Options which may granted to all Optionees under the Plan.
6. PURCHASE PRICE
The purchase price of each share covered by each Incentive Option shall
not be less than 100% of the Fair Market Value Per Share of the Common Stock on
the date the Incentive Option is granted; provided, however, that if at the time
an Incentive Option is granted the Optionee owns or would be considered to own
by reasons of Section 424(d) of the Code more that 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary or parent
corporation of the Company, the purchase price of the shares covered by such
Incentive Option shall not be less than 110% of the Fair Market Value Per Share
of the Common Stock on the date the Incentive Option is granted.
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7. DURATION OF OPTIONS
The expiration date of the Option and all rights thereunder shall be
determined by the Committee. In the event the Committee does not specify the
expiration date of the Option, the expiration date shall be 10 years from the
date on which the Option was granted, and shall be subject to earlier
termination as provided herein; provided, however, that if at any time an
Incentive Option is granted the Optionee owns or would be considered to own by
reason of Section 424(d) of the Code more that 10% of the total combined voting
power of all classes of stock of the Company, such Incentive Option shall expire
five years from the date the Incentive Option is granted unless the Committee
selects an earlier date.
8. EXERCISE OF OPTIONS
(a) An Option shall vest and become exercisable from time to time in
installments or otherwise in accordance with such schedule and upon such other
terms and conditions as the Committee shall in its discretion determine at the
time the Option is granted. An Optionee may purchase less than the total number
of shares for which the Option is exercisable, provided that a partial exercise
of an Option may not be for less than 100 shares, unless the exercise is during
the final year of the Option, and shall not include any fractional shares. As a
condition to the exercise, in whole or in part, of any Option, the Committee may
in its sole discretion require the Optionee to pay, in addition to the purchase
price of the shares covered by the Option, an amount equal to any federal, state
or local taxes that the Committee has determined are required to be paid in
connection with the exercise of such Option in order to enable the Company to
claim a deduction or otherwise. Furthermore, if any Optionee disposes of any
shares of stock acquired by exercise of an Incentive Option prior to the
expiration of either of the holding periods specified in Section 422(a)(1) of
the Code, the Optionee shall pay to the Company, or the Company shall have the
right to withhold from any payment to be made to the Optionee, an amount equal
to any federal, state or local taxes that the Committee has determined are
required to be paid in connection with the exercise of such Option in order to
enable the Company to claim a deduction.
(b) No Option will be exercisable (and any attempted exercise will be
deemed null and void) if such exercise would create a right of recovery for
"short-swing profits" under Section 16(b) of the Securities Exchange Act of
1934, as amended. This Section 8(b) is intended to protect persons subject to
Section 16(b) against inadvertent violations of Section 16(b) and shall not
apply with respect to any particular exercise of an Option if expressly waived
in writing by the Optionee at the time of such exercise.
9. METHOD OF EXERCISE
(a) To the extent that an Option has become exercisable, the Option may
be exercised from time to time by giving written notice to the Company stating
the number of shares with respect to which the Option is being exercised,
accompanied by payment in full, by cash or by certified or cashier's check
payable to the order of the Company or the equivalent thereof acceptable to the
Company, of the purchase price for the number of shares being purchased and, if
applicable, any federal, state or local taxes required to be paid in accordance
with the provisions of Section 8(a) hereof. The Company shall issue a separate
certificate or certificates with respect to each Option exercised by an
Optionee.
(b) In the Committee's discretion, payment of the purchase price for
the shares with respect to which the Option is being exercised may be made in
whole or in part with shares of Common Stock. If payment is made with shares of
Common Stock, the Optionee, or other person entitled to exercise the Option,
shall deliver to the Company certificates representing the number of shares of
Common Stock in payment for the shares being purchased, duly endorsed for
transfer to the Company. If requested by the Committee, prior to the acceptance
of such certificates in payment for such shares, the Optionee, or any other
person entitled to exercise the Option, shall supply the Committee with a
representation and warranty in writing that he has good and marketable title to
the shares represented by the certificate(s), free and clear of all liens and
encumbrances. The value of the shares of Common Stock tendered in payment for
the shares being purchased shall be their Fair Market Value Per Share on the
date of the exercise.
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(c) Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of the shares for such period as may be required
for it to comply, with reasonable diligence, with any applicable listing
requirements of any national securities exchange or any federal, state or local
law. If an Optionee or other person entitled to exercise an Option fails to
accept delivery of or fails to pay for all or any portion of the shares
requested in the notice of exercise upon tender of delivery thereof, the
Committee shall have the right to terminate his Option with respect to such
shares.
10. NON-TRANSFERABILITY OF OPTIONS
No Option granted under the Plan shall be assignable or transferable by
the Optionee, either voluntarily or by operation of law, otherwise than by will
or the laws of descent and distribution, and each Option shall be exercisable
during the Optionee's lifetime only by the Optionee.
11. CONTINUANCE OF RELATIONSHIP
Nothing contained in the Plan or in any Option granted under the Plan
shall confer upon any Optionee any right with respect to the continuation of his
employment by or other Relationship with the Company, or interfere in any way
with the right of the Company at any time to terminate such employment or other
Relationship or to increase or decrease the compensation of the Optionee from
the rate in existence at the time of the grant of an Option.
12. TERMINATION OF RELATIONSHIP OTHER THAN BY DEATH OR PERMANENT DISABILITY
Except as the Committee may otherwise determine at any time with
respect to any particular Non-Qualified Option granted hereunder:
(a) If an Optionee ceases to have a Relationship for any reason other
than his death or Permanent Disability, any Options granted to him shall
terminate 90 days from the date on which such Relationship terminates unless
such Optionee has resumed or initiated a Relationship and has a Relationship on
such date. During the 90-day period, the Optionee may exercise any Option
granted to him but only to the extent such Option was exercisable on the date of
termination of his Relationship and provided that such Option has not expired or
otherwise terminated as provided herein. A leave of absence approved in writing
by the Committee shall not be deemed a termination of Relationship for purposes
of this Section 12, but no Option may be exercised during any such leave of
absence, except during the first 90 days thereof.
(b) For purposes hereof, termination of an Optionee's Relationship for
reasons other than death or Permanent Disability shall be deemed to take place
upon the earliest to occur of the following: (i) the date of the Optionee's
retirement from employment under the normal retirement policies of the Company;
(ii) the date of the Optionee's retirement from employment with the approval of
the Committee because of disability other than Permanent Disability; (iii) the
date the Optionee receives notice or advice that his employment or other
Relationship is terminated; or (iv) the date the Optionee ceases to render the
services which he was employed, engaged or retained to render to the Company or
any subsidiary (absences for temporary illness, emergencies and vacations or
leaves of absence approved in writing by the Committee excepted). The fact that
the Optionee may receive payment from the Company after termination for vacation
pay, for services rendered prior to termination, for salary in lieu of notice or
for other benefits shall not affect the termination date.
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(c) Notwithstanding anything in the Plan to the contrary, no Option may
be exercised or claimed following an Optionee's termination of Relationship as a
result of Termination for Cause, and no Option may be exercised or claimed while
the Optionee is being investigated for a Termination for Cause.
13. DEATH OR PERMANENT DISABILITY OF OPTIONEE
Except as the Committee may expressly determine otherwise at any time
with respect to any particular Non-Qualified Option granted hereunder, if an
Optionee shall die at a time when he is in a Relationship or if the Optionee
shall cease to have a Relationship by reason of Permanent Disability, any Option
granted to him shall terminate one year after the date of his death or
termination of Relationship due to Permanent Disability unless by its terms it
shall expire before such date or otherwise terminate as provided herein, and
shall only be exercisable to the extent that it would have been exercisable on
the date of his death or his termination of Relationship due to Permanent
Disability. In the case of death, the Option may be exercised by the person or
persons to whom the Optionee's rights under the Option shall pass by will or by
the laws of descent and distribution.
14. STOCK PURCHASE NOT FOR DISTRIBUTION
Each Optionee shall, by accepting the grant of an Option under the
Plan, represent and agree, for himself and his transferees by will or the laws
of descent and distribution, that all shares of stock purchased upon exercise of
the Option will be received and held without a view to distribution except as
may be permitted by the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder. After each notice of exercise of any portion
of an Option, if requested by the Committee, the person entitled to exercise the
Option shall agree in writing that the shares of stock are being acquired in
good faith without a view to distribution.
15. PRIVILEGES OF STOCK OWNERSHIP
No person entitled to exercise any Option granted under the Plan shall
have any of the rights or privileges of a stockholder of the Company with
respect to any shares of Common Stock issuable upon exercise of such Option
until such person has become the holder of record of such shares. No adjustment
shall be made for dividends or distributions of rights in respect of such shares
if the record date is prior to the date on which such person becomes the holder
of record, except as provided in Section 16 hereof.
16. ADJUSTMENTS
(a) If the number of outstanding shares of Common Stock is increased or
decreased, or if such shares are exchanged for a different number or kind of
shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, combination of
shares or other similar transaction, the aggregate number of shares of Common
Stock subject to the Plan as provided in Section 4 hereof, the shares of Common
Stock subject to issued and outstanding Option under the Plan and the aggregate
number of shares of Common Stock with respect to which Options may be granted to
a single Optionee as provided in Section 5(c) hereof shall be appropriately and
proportionately adjusted by the Committee. Any such adjustment in the
outstanding Options shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Option but with an appropriate
adjustment in the price for each share or other unit of any security covered by
the Option. No adjustment shall be made on account of any transaction or event
not specifically set forth in this Section 16(a), including, without limitation,
the issuance of Common Stock for consideration.
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(b) Notwithstanding the provision of Section 16(a), upon the
dissolution or liquidation of the Company or upon any reorganization, merger or
consolidation with one or more corporations as a result of which the Company is
not the surviving corporation, or upon a sale of all or substantially all of the
assets of the Company to another corporation or entity, the Committee may take
such action, if any, as it in its discretion may deem appropriate to accelerate
the time within which and the extent to which Options may be exercised, to
terminate Options at or prior to the date of any such event, or to provide for
the assumption of Options by surviving, consolidated, successor or transferee
corporations.
(c) Adjustments under this Section 16 shall be made by the Committee,
whose determination as to which adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of stock
shall be issued under the Plan or in connection with any such adjustment.
17. CHANGE OF CONTROL
Notwithstanding any other section of this Plan, in the event of a
change of control, vesting on all unexercised Options will accelerate to the
change-of-control date. For purposes of this Plan, a "Change of Control" of the
Company shall be deemed to have occurred at such time as (a) any "person" (as
that term is defined in Section 2 of the Securities Act of 1933, as amended),
other than James E. Crabbe, or his affiliates, including the James E. Crabbe
Revocable Trust, or an employee benefit plan of the Company becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended), directly or indirectly, of securities of VendingData
representing 25.0% or more of the combined voting power of the Company's
outstanding securities ordinarily having the right to vote at the election of
directors; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof; or (c) the approval by the Company's stockholders of the merger or
consolidation of the Company with any other corporation or business
organization, the sale of all or substantially all the assets of the Company, or
the liquidation or dissolution of the Company; or (d) a proxy statement is
distributed soliciting proxies from the stockholders of the Company seeking
stockholder approval of a plan of reorganization, merger or consolidation of the
Company with one or more corporations as a result of which the outstanding
shares of the Company's securities are actually exchanged for or converted into
cash or property or securities not issued by the Company; or (e) at least a
majority of the Incumbent Board who are in office immediately prior to any
action proposed to be taken by the Company determine that such proposed action,
if taken, would constitute a change of control of the Company and such action is
taken.
18. TAX WITHHOLDING
The Company shall have the right to deduct or withhold from all
payments or distributions amounts sufficient to cover any federal, state or
local taxes required by law to be withheld or paid with respect to such payments
of distributions. In the case of Non-Qualified Options, the Company may require
that required withholding taxes be paid to the Company at the time the Option is
exercised. The Company may also permit any withholding tax obligations incurred
by reason of the exercise of any Option to be satisfied by withholding shares
(that would otherwise be obtained upon such exercise) having a fair market value
equal to the aggregate amount of taxes that are to be withheld. In the case of
persons subject to Section 16(b), such withholding shall be on terms consistent
with Rule 16b-3.
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19. AMENDMENT AND TERMINATION OF PLAN
(a) The Board may from time to time, with respect to any shares at the
time not subject to Options, suspend or terminate the Plan or amend or revise
the terms of the Plan; provided that any amendment to the Plan shall be approved
by a majority of the shares present and voting at either an annual or special
meeting called for such purpose, if the amendment would (i) materially increase
the benefits accruing to participants under the Plan, (ii) increase the number
of shares of Common Stock which may be issued under the Plan, except as
permitted under the provisions of Section 16 hereof, or (iii) materially modify
the requirements as to eligibility for participation in the Plan.
(b) No amendment, suspension or termination of the Plan shall, without
the consent of the Optionee, alter or impair in a manner adverse to the Optionee
any right or obligation under any Option theretofore granted to such Optionee.
(c) The terms and conditions of any Option granted to an Optionee may
be modified or amended only by a written agreement executed by the Optionee and
the Company; provided, however, that if any amendment or modification of an
Incentive Option would constitute a "modification, extension or renewal" within
the meaning of Section 424(h) of the Code, such amendment shall be null and void
unless the amendment contains an acknowledgment by the parties substantially in
the following form: "The parties hereto recognize and agree that this amendment
constitutes a modification, renewal or extension within the meaning of Section
424(h) of the Code, of the option granted on _______________."
20. TERM OF PLAN
No option shall be granted pursuant to the Plan after 10 years from the
earlier of the date of adoption of the Plan by the Board or the date of approval
of the Plan by the Company's stockholders.